Sands link to Chinese traids

[aurvandil]

Recently, Reuters did an article on how the Las Vegas Sands are related to the Chinese triads. The following article explains the way in which the "VIP" rooms are run in Macau and how the triads are involved.

At the heart of the triad involvement in Macau casino gambling is the “Bate-Ficha” or “dead chip” business model. Under this business model, the casino operator sells a large number of “dead chips” to a third party. In casino parlance, “dead chips” are gambling chips which can only be used to play casino games; they cannot be exchanged for cash. Such “dead chips” are usually sold at heavily discounted rates.

The third party which purchased the “dead chips” are usually given a “VIP” room within the casino. The third party then proceeds to attract gamblers to this “VIP” room where they will re-sell the “dead chip” to gamblers at a profit.

To attract gamblers, the third party normally works with junket operators. The junket operators are crucial for the success of Macau casinos due to the strict currency controls China has implemented. Travelers leaving China for Macau are only allowed to carry US$5,000. High rollers who wish to gamble more than this amount must therefore have access to a credit line at Macau. This credit line is normally provided by the junket operator.

The “Bate-Ficha” business model has allowed the Chinese triads to infiltrate casino gambling in Macau. Their involvement is at 2 levels:

1) As third party operators of the “VIP” rooms
2) As junket operators.

For more details on the “Bate-Ficha” business and junket operations, please refer to the following url:

http://www3.austlii.edu.au/au/journa...JJ/2002/5.html


As in all business where the triads are involved, it is not possible to be in the “Bate-Ficha” business or be a junket operator without triad links. Intimidation and physical violence are frequently used as means to expand and secure business operations.

Within HK, there are currently 4 major triad groups. These are Sun Yee On, 14K, Wo Hop To and Wo Shing Wo. Stanley Ho has known links with Sun Yee On and 14K. Through his daughter Pansy Ho, he has set up a joint venture with the American casino operator MGM. The triad links were recently exposed by the gambling authorities in Atlantic City. As their business in Macau is so profitable, MGM chose to exit Atlantic City rather than end their association with Pansy Ho. For more details, please refer to this article by Bloomberg.

http://www.bloomberg.com/apps/news?p...d=aqZga1sai1Lg

From the Reuters article, it would appear the Las Vegas Sands has links with Wo Hop To. Since the Reuters article was published, the Las Vegas Sands has come under investigation by US gambling authorities. For more details, please refer to the following articles:

http://www.reuters.com/article/idUSTRE62S34020100329

http://www.reuters.com/article/idUSN3122976020100331


Technically the triads involved in these operations are NOT part of the casinos in Macau. The casino is therefore able to put up the fiction that they are “clean”. Under Singapore’s Casino Control Act 2006, the triads may however classified as associates due to the amount of power they exercise over the casinos. For more details on the Casino Control Act 2006, please refer to the following url:

http://statutes.agc.gov.sg/non_versi...thod=part&sl=1

 

[promisedland]

[Sands link to Chinese traids]

wow!! eureka!! what awesome discovery!!!! LOL!!!

 

[gerard126333]

The following is a report from Reuters that shows that Sands is linked with the Chinese triads. Under the Casino Control Act 2006, the Casino Regulatory Authority should investigate this linkage between the Sands Macau operations and the Chinese triads. If the linkage is true, the Act requires that the Sands casino license be revoked.

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Special report: High-rollers, triads and a Las Vegas giant

By Matt Isaacs and Reuters staff
SAN FRANCISCO/MACAU (Reuters) - Late last autumn, a Hong Kong jury convicted four men of a conspiracy to commit bodily harm and a fifth of soliciting a murder.

At first, the men had been ordered to break the arms and legs of a dealer at Sands Macau suspected of helping a patron cheat millions of dollars from the business. Later, a call went out to murder the dealer, court records show. But then one of the gangsters balked and reported the plans to authorities.

The plot's mastermind, according to testimony in previously undisclosed court transcripts obtained by Reuters, was Cheung Chi-tai. At trial a witness identified Cheung as a leader of the Wo Hop To -- one of the organized crime groups in the region known as triads. Another witness, a senior inspector with the Hong Kong police called to testify because he is an expert on the triads, identified Cheung by name as someone who would commit crimes for money. Cheung's organized crime affiliation was corroborated in interviews for this article with law enforcement and security officials intimately familiar with the gaming industry in Macau.

The murder-for-hire case sheds light on the links between China's secretive triad societies and Macau's booming gambling industry. It also raises potentially troubling questions about one of the world's largest gaming companies, Las Vegas Sands, which plans to open a $5.5 billion Singapore casino resort in late April.

Cheung was not just named as a triad member but also, according to a regular casino patron testifying in the trial, "the person in charge" of one of the VIP rooms at the Sands Macau, the first of three casinos run here by Las Vegas Sands. In addition, Cheung has been a major investor in the Neptune Group, a publicly traded company involved in casino junkets -- the middlemen who bring wealthy clients to Macau's gambling halls. Documents show that his investment allowed him a share in the profits from a VIP gambling room at the casino.

An examination of Hong Kong court records, U.S. depositions from the former president of Sands, and interviews with law enforcement and security officials in both the U.S. and Macau, reveals a connection between Las Vegas Sands and Cheung -- ties that could potentially put Sands in violation of Nevada gaming laws.

The Reuters investigation is a collaboration with the Investigative Reporting Program at University of California, Berkeley.

U.S. casinos operating in Macau are all headquartered in Nevada and must comply with that state's laws which prohibit "unsuitable" associations that "discredit" its gaming industry. Those laws are meant to keep organized crime figures out of the casinos.

Leading up to its public offering in Hong Kong last November, Sands China, a subsidiary of Las Vegas Sands, acknowledged the risks of working with gaming promoters -- another term for junkets: "If we are unable to ensure high standards of probity and integrity of our Gaming Promoters with whom we are associated, our reputation may suffer or we may be subject to sanctions, including the loss of (Sands' Macau gaming license,)" the company wrote in a public filing.
Randall Sayre, a member of the Nevada Gaming Control Board that monitors casino compliance, declined to comment specifically on Sands Macau, writing in an email that the state "takes no public position on suitability ... without a full investigative work-up."

A gaming official, who insisted upon anonymity, said: "This relationship (with Cheung) would be of concern to Nevada authorities. You're talking about direct ties to bad guys." Another said the agency is monitoring the situation.

Las Vegas Sands issued a statement saying, "to our knowledge, Mr. Cheung Chi Tai is not listed as a director or shareholder" with any of the gaming promoters the company uses in Macau, but declined to comment further.

Sands was the first U.S. operator to cash in on the Chinese passion for gambling when it entered Macau in 2004 after the government opened the casino market to outsiders.

Since reverting to China in 1999, Macau, an hour away from Hong Kong by ferry, has flourished as one of the world's wealthiest cities. The territory's economy has soared in recent years -- much of the wealth generated by the enclave's casinos.

Indeed, the former Portuguese colony has become a playground for China's nouveau riche. And the gleaming neon red lights of the Sands Macau casino are the first sights a visitor takes in as the ferry approaches Macau.

THE JUNKETS

The link between Macau's gambling industry and organized crime may be an open secret, but it has come under increasing scrutiny lately. Within the last two weeks, MGM Mirage said it would give up its holdings in New Jersey in response to pressure from the New Jersey Division of Gaming Enforcement. The state agency had said that Pansy Ho, MGM Mirage's partner in Macau and the daughter of casino tycoon Stanley Ho, was an "unsuitable" associate, an assertion stemming from the agency's belief that her father has links to organized crime.

The involvement of the triads in Macau's casinos is centered on the murky and highly profitable junket business. The VIP sector brought in $9.9 billion last year, two-thirds of the enclave's total gambling revenues.
Macau has about 187 licensed junket operators, said Manuel Joaquim das Neves, director of Macau's Gaming Inspection and Coordination Bureau.

The junkets are crucial because they ensure the flow of capital by extending credit to gamblers, often millions of dollars on a visit. They assume responsibility for collecting on their loans -- at times indelicately, authorities say.

They also often assume management of the private VIP rooms. And while many law-abiding junkets are active in Macau, experts say the industry is highly susceptible to criminal influence given the extra-legal functions and opaque environments in which they work.

In an interview, Dan Grove, a former agent for the FBI who oversaw security for Sands Macau in the first few years after its opening -- and before the casino became involved in junkets -- characterized pressure from triads to work with the casino as "immense."

When known crime figures applied directly for contracts, blocking them was easy, Grove says. But if legitimate professionals submit applications and then sub-contract the work to the triads, detecting such ties was more difficult if not impossible.

JUMBO BOOM

Cheung Chi-tai's ties to Sands Macau came through such a multi-tiered arrangement. His solely owned company, Jumbo Boom Holdings, provided capital for another firm, now called Neptune Group, to acquire a stake in Hou Wan, a junket operator. Hou Wan was entitled to profits from Sands Macau's Chengdu VIP room.

Cheung owned more than 8 percent of Neptune Group in 2008, according to public filings with the Hong Kong stock exchange. That made him a substantial shareholder when the call for the dealer's murder went out.

When asked about Cheung, Nicholas Niglio, Neptune's chief operating officer, said: "I'm not familiar with him at all."
After a reporter showed him Neptune's 2008 annual report listing the firm's substantial shareholders, including Cheung, Niglio declined to respond specifically. Cheung does not appear in Neptune's 2009 annual report.

Niglio said Neptune wasn't a junket itself but invests in VIP junkets that operate at the Sands Macau, the Venetian Macau and Galaxy Entertainment's StarWorld casinos. He said Neptune now had a 20 percent stake in Hou Wan, a junket operator that runs around 20 VIP tables at the Sands Macau.

In Neptune's public filings three years ago, Cheung was described as a "merchant in Hong Kong" whose company "generally does not engage in underwriting business and has no underwriting experience as at the date of this announcement."

While Niglio described Neptune merely as an "investor" in junkets, trial testimony placed Cheung inside the casino's private room.

According to testimony by Siu Yun-ping, aka the "God of Gambling", who won about HK$100 million ($12.9 million) between August 2007 and January 2008 at various casinos, Cheung was "the person in charge" of the Chengdu Hall, one of the VIP rooms that Siu frequented.

Las Vegas Sands, however, has said it maintains management of all its VIP rooms, though it acknowledges working with gaming promoters to attract customers.

Wo Hop To Triad Group
http://en.wikipedia.org/wiki/Wo_Hop_To

 

[aurvandil]

Interesting piece from the BT. Aware that this could blow up in their face, the msm is now busy covering all the bases.

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Sands' Macau links may come under scrutiny
Partner's role in murder-for- hire case may affect its S'pore casino licence


By ARTHUR SIM


AN INVESTIGATION in Macau has revealed that a local partner of Las Vegas Sands (LVS) could have links with triads. This could have implications for Marina Bay Sands when it seeks to obtain its casino licence here in Singapore.

On Monday, Reuters reported that Cheung Chi Tai, who is implicated in a murder-for-hire case, was 'the person in charge' of one of the VIP rooms at the Sands Macau casino, which is owned by LVS.

The intended victim was a dealer at Sands Macau suspected of helping a patron cheat millions of dollars.

Reuters also said that Mr Cheung has been a major investor in the Neptune Group, a publicly traded company involved in casino junkets and that an examination of Hong Kong court records, US depositions from the former president of Sands, and interviews with law enforcement and security officials in both the US and Macau, revealed 'a connection between Las Vegas Sands and Mr Cheung'.

In Singapore, LVS hopes to open a casino at Marina Bay Sands (MBS) later this month. It is understood that LVS has not yet been awarded the casino licence.

When contacted, Singapore's Casino Regulatory Authority declined to comment if these recent developments in Macau would have any bearing on the casino licence being awarded.

LVS could also not be contacted for a comment. However, Reuters reported an LVS spokesman as saying 'to our knowledge, Mr Cheung Chi Tai is not listed as a director or shareholder' with any of the gaming promoters that the company uses in Macau.

Speaking to Reuters, Randall Sayre, a member of the Nevada Gaming Control Board that monitors casino compliance, declined to comment specifically on Sands Macau, writing in an e-mail that the state 'takes no public position on suitability . . . without a full investigative work-up.'

More recently, Casino Gaming Stock website has reported Mr Sayre as saying: 'At the conclusion of our analysis of the situation in its entirety, this agency will move appropriately as governed by Nevada law and standards required of our Nevada licences.'

Mr Sayre also said that the board was analysing the status of VIP room operations in Macau casinos and possible links to criminal activity and that the situation would be addressed 'at the point the investigative product is ripe for consideration'.

The Reuters report revealed details of Mr Cheung's role in a case in which a Hong Kong jury convicted four men of a conspiracy to commit bodily harm and a fifth of soliciting a murder.

Mr Cheung was identified as the plot's mastermind, according to testimony in previously undisclosed court transcripts obtained by Reuters.

US gaming regulators appear to be increasingly wary of US-based casino operators with casinos in Macau.

Last month, details on a five-year investigation by New Jersey regulators into MGM Mirage's operations in Macau revealed that it found Pansy Ho to be an unsuitable partner for the gaming giant because of her father, Stanley Ho's alleged links with triads.

In a report, the regulators also cited the junket influence within Mr Ho's VIP rooms as a prime concern. 'The VIP rooms in (Stanley Ho's) casinos provided organised crime the entry into the Macau gaming market that it had previously lacked,' the report said.

VIP rooms are thought to contribute two-thirds of total gaming revenue in Macau.

Interestingly, Genting Group, which owns Resorts World Sentosa (RWS), operates a VIP room at MGM's casino in Macau. It also holds a stake in MGM Mirage.

RWS was awarded its casino licence in February.

 

[aurvandil]

The NSP has issued a press statement with regard to the links between the LV Sands and the triads.

http://www.nsp.sg/press_releases.php?more=142

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Concerns on the Casino License for Marina Sands

1. The National Solidarity Party notes that there are news reports on Macau Sands’ links to its partner who is implicated in the murder-for-hire case being tried in Hong Kong. According to Business Time April 3 2010 report, “an investigation in Macau has revealed that a local partner of Las Vegas Sands (LVS) could have links with triads”.

2. We also note that Reuters has reported on 31st March that “Nevada’s Gaming Control Board said on Wednesday it was analyzing the status of VIP room operations in Macau casinos and possible links to Chinese criminals”.

3. The PAP government has stated categorically that it will not issue any casino license to any operators that have links to any triads in the world when the decision to build the two casinos was made back in 2005. While the constructions of both casino resorts are due to be completed soon, NSP is very concerned about the social implications of issuing casino license to operators who have links to triads.

4. We notice that the Casino Regulatory Authority (CRA) under the Ministry of Home Affairs has declined comment on this issue when contacted by the Business Time reporter. We strongly feel that CRA should make an appropriate response to the latest development of Sands in view of the pending opening of Marina Sands at the end of this month.

5. We hope that the CRA would take the recent development into careful considerations when it decides upon the issuing of Casino License to Marina Sands. We would also like to know the contingency plans that the government has in place to deal with casino operators who are found to breach the rules on having links to any triads after casino licenses have been issued.

Goh Meng Seng
Secretary General of the 13th CEC

 

[aurvandil]

The following is a statement issued by Minister Wong Kan Seng. It was issued on 18 Apr 2005 and details what the Casnio Regulatory Authority (CRA) would do to ensure that organised crime does not infiltrate the casinos.

http://app.mti.gov.sg/data/pages/606/doc/Ministerial Statement - WKS 18apr05.pdf

Casino Regulatory Authority

One of the key institutions to help manage the social impact of having a casino in Singapore will be the casino regulator. The Ministry of Home Affairs will set up a new regulatory agency to regulate the casino. The casino regulator will put in place a strict regulatory regime to ensure that the casino remains free from criminal influence and that illegal activities on the premises are kept under control.

The full details on the casino regulatory regime are still being worked out. Today, I shall highlight some key measures that the regulator will implement to regulate the casino operations.

We recognize that having the right owners, managers and employees will be important to pre-empt the infiltration of criminal elements and money laundering syndicates into the casino operations. The regulator will therefore screen the principal shareholders, directors, key managers and employees involved in gaming, not just once-off but over regular intervals.

The regulator will also monitor the casino's relationship with its vendors, suppliers and agents. Contracts between the casino and its vendors and suppliers above a certain threshold will be scrutinized. The regulator will have the right to require that the casino does not enter into contracts with vendors and suppliers which are deemed unsuitable due to suspicious backgrounds or known involvement in criminal activities. Casino agents or junket operators who bring in premium players from overseas will also be screened and licensed.

To combat money laundering activities, we will adopt international best practices in tracking suspicious transactions. The regulator will require the casino to record transactions of S$5,000 and above. Transactions of S$10,000 and above and all other suspicious transactions will have to be reported to the regulator. The casino will also be required keep all relevant records for a minimum period of seven years.

In addition, the casino will be required to set up a dedicated security team and a comprehensive CCTV surveillance system to ensure security within the casino premises.

 

[cunnosieur]

BANK OF CHINA CEO
Liu was sentenced to death but given a two-year reprieve, the official Xinhua News Agency reported. Such suspended death sentences usually are commuted to life in prison if the convict is deemed to have reformed.

Liu also was a deputy chairman of Beijing-based Bank of China, one of China's four main state-owned commercial banks.

He was convicted of embezzling 14.3 million yuan ($1.8 million) with others, plus another 7.5 million yuan ($930,000) for himself, Xinhua said. It said Liu also was convicted of taking 1.4 million yuan ($170,000) in bribes.

人之初，性本恶

 

[aurvandil]

The following was published in the South China Morning Post on Oct 16 2009.

Let use hope that Deputy Prime Minister Wong stands firm and lives up to his promise of not letting the triads into Singapore.

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Officer lifts lid on workings of the underworld
Court told of police, triad relationship
Yvonne Tsui
Oct 16, 2009

In the shadows of Hong Kong's underworld, the relationship between police and triads - the violent gangs that hold sway over wide swathes of the city and often do battle for each other's territory - is not always what it seems.

According to an experienced anti-triad officer, the two sides shared a "special relationship" that often saw senior triad members helping the police, and indirectly themselves.

Senior detective inspector Cheung Man-shing said the gangsters, for whom "loyalty and unity" were all-important, usually maintained strict silence during interviews under caution, meaning what they say can be used as evidence.

But off the record they can be much more forthcoming - especially with information that might harm a rival and not themselves, said Cheung, a triad expert with the police criminal intelligence bureau.

"When police officers interview triad members during an investigation, they normally remain silent under caution but are very willing to tell the whole story when they are interviewed not under caution," he told the Court of First Instance yesterday.

Triad informants would tip off police officers about matters concerning other triad branches and matters that did not concern themselves, he said, describing this as a "special kind of relationship" between the police and triad members.

Cheung was giving evidence as an expert witness in the Court of First Instance trial of five alleged Wo Hop To triad members, accused of involvement in a plot to murder casino dealer Wong Kam-ming in May, last year, after a one of his clients won hundreds of millions of dollars in Macau casinos.

Cheung told the court that the history of triad societies could be traced back to 1674 when an organisation was founded in China with a mission to overthrow the Qing dynasty.

"In Hong Kong, triad societies only engage in illegal activities," he said. "The sole purpose is to make money. [Triad people] do illegal things, and they do legal things through illegal means."

Giving a rare public insight into the alleged activities of some of the city's most notorious gangs, Cheung said Wo Hop To was one of the most influential, with members active in Western District, Aberdeen, Wan Chai and Yuen Long. Its activities included loan sharking and gambling.

Another society, Wo Shing Wo, was active in Kowloon West with underground casinos, drug trafficking, piracy, extortion and vice.

The 14K society, he said, was involved in extortion, prostitution, piracy and illegal franchising of taxi stops.

Sun Yee On, active in the Tsim Sha Tsui area, engaged in activities related to dangerous drugs, extortion and piracy.

Cheung said there were 2,378 triad-related cases last year, with 648 involving woundings and serious assaults, compared to 2,258 and 555 respectively in 2007.

Of the violent crimes, most arose from fights in public places and were related to conflicts between different triad societies.

Under a code of "loyalty and unity", triad members usually obeyed without question any instructions from higher levels of the society's hierarchy.

"Most of the time they simply follow instructions from their superiors without knowing much about the background," Cheung told the court.

The experienced triad-fighter said the lowest tier comprised two categories: "ordinary members", who had been through a formal ceremony, and "hanging the blue lantern" members, who had not.

Basic members could be promoted to various kinds of office bearers, including "the red pole", also known as 426, who traditionally took care of the operations of the society; "the white paper fan", or 415, who was responsible for the administration and organising ceremonies; and the "grass sandals", or 432, who communicated between different branches.

Office bearers were all qualified to be leaders of a branch and had control over money, according to the inspector. Faction leaders were called "big brothers" or "Dai Gor", while the top leader was "Ah Kung", or "grandfather", the court heard.

In the case, before Mrs Justice Verina Bokhary, See Wah-lun, 30, Tang Ka-man, 31, Wong Chi-man, 26, Yeung Chun-kit, 22, and Chan Ho-leung, 35, have pleaded not guilty to charges including acting as triad members and conspiracy to cause grievous bodily harm.

See, an alleged senior member of the group, is also charged with conspiring with "Tsang Pau", identified in court as Macau casino operator Cheung Chi-tai, to commit murder, and soliciting nine people, including the four other defendants, to murder.

The hearing continues today.

 

[aurvandil]

An update on the linkage between the Sands and the Chinese triads. Of interest is that the Sands 3 Macau casinos contributed to almost 90% of the Sands profits.

Still hoping that Deputy Prime Minister Wong will live up to his promise and not allow triad linked casinos to operate in Singapore.


http://www.lasvegassun.com/news/2010/apr/11/macau-giving-fits-nevada-regulators/

Macau giving fits to Nevada regulators
Organized crime said to run rampant where state giants do business

Renewed concern about the influence of organized crime in Macau, where three Las Vegas-based gaming giants own casinos, has raised questions about the ability of Nevada regulators to monitor or act on what takes place on the other side of the world.

Industry titans Steve Wynn and Sheldon Adelson view their companies as more Asian than American. Wynn’s Macau casino accounted for 67 percent of his company’s 2009 earnings. Adelson’s three Macau casinos accounted for 90 percent of Las Vegas Sands’ earnings last year. The companies raised $5 billion in initial public offerings of their Macau subsidiaries’ shares last fall.

Adelson is resuming work on a resort attraction in the enclave with more than 6,000 rooms. Wynn Resorts is opening an expansion this month, also has plans for a third resort in Macau.

Harrah’s Entertainment, which initially avoided a deal in Macau because of concerns about organized crime in the casinos, is angling for a piece of the world’s biggest and fastest-growing gambling market. Macau generated $15 billion in gaming revenue last year, a 10 percent increase. That dwarfed the $10.4 billion generated by Nevada casinos in 2009.

Law enforcement authorities in the United States and other countries contend a lot of money flowing through Macau casinos from China is laundered cash from illicit sources. Regulatory experts say the VIP room structure, which enables casinos to farm out high-limit gambling rooms to third-party “junkets” that bring in gamblers, extend credit and comp them, enables the third parties to operate with a degree of anonymity that mostly would not be allowed elsewhere.


Is Nevada doing enough?

Organized crime was entrenched in Macau’s gambling industry before Nevada companies began operating there in 2004, they say. Unlike the mob, which was eventually phased out of casinos through a combination of regulatory enforcement and changes in financing rules, organized crime is alive and well in Macau, they say. New Jersey regulators say it taints MGM Mirage’s Macau operation, while Reuters news agency last month reported that an Asian mob figure ran a gambling room inside Sands Macau.

Some critics say Nevada regulators aren’t doing their jobs when it comes to Macau operations, while regulators say they are doing as much as their jobs allow — which doesn’t include being able to dictate how Macau’s government regulates casinos.

Though some regulators are uncomfortable with the enclave’s lax regulatory system, have little choice but to allow the state’s biggest employers and taxpayers to do business in the world’s largest gambling market, some experts say.

“This is a Nevada variation of ‘too big to fail,’ ” says Bill Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at UNR. “The big growth market is Asia, and if you want to be in the gaming business you need to be in Asia. Therefore, you have to do things the way they are done in Asia.”

“If you say politics is not involved, you’re not in touch with what’s happening,” says Jeff Voyles, an associate professor of casino management at UNLV and a partner with gaming consulting firm Globalysis. “You don’t want to (tick) off the largest private employer in ... Nevada. As a regulator, do you really want to railroad a major deal, or find a way to make it work?”

But Nevada regulators say it’s wrong to assume the state’s treatment of Nevada-owned casinos in Asia is driven by politics or economics. The regulators say they are following the letter of the state’s “foreign gaming” law. That law hasn’t changed since 1997, when it was amended to make it easier for companies to expand outside Nevada. That was when Nevada-style casinos were spreading to other states rather than locales with different political structures and cultural norms.

For many years, the state prevented Nevada operators from opening out-of-state casinos. It was a blatantly protectionist stance by a state that wanted to keep the casino windfall to itself.

But as gambling spread to other states, Nevada companies sought a piece of the action.

New Jersey voters approved casino gambling in 1976 — and the next year, responding to industry pressure, the Nevada Legislature lifted the expansion prohibition. It allowed casino operators to set up shop elsewhere, with a catch: They had to obtain Nevada’s approval first.

Lawmakers said then that condition was aimed at upholding the Nevada industry’s reputation and preventing embarrassment down the road. But legislators had ulterior motives, regulatory experts say.

“There were all sorts of fears. People weren’t sure what to expect when gaming expanded to other regions. They were scared about losing the goose that laid the golden egg, so to speak,” says Greg Giordano, a Las Vegas gaming attorney who oversaw the Gaming Control Board’s corporate securities division that reviews foreign gaming applications.

When casinos spread to other states in the 1990s, Nevada companies argued the foreign gaming law put them at a disadvantage by unreasonably delaying business deals. It required Nevada regulators, after an in-depth review that could take months or even years, to pass judgment on other states’ or countries’ regulatory systems.

For example, Nevada regulators in 1985 approved Hilton Hotels’ application to own a minority stake in the Jupiters Casino in Queensland, Australia, after a two-year investigation of that country’s regulatory controls, which were deemed “at least as effective as Nevada’s.”

In 1987, legislators removed that requirement. Although this favored expansion efforts, regulators acknowledged that it relieved them from making subjective calls that could lead to diplomatic problems. At the time, governments around the world were seeking regulatory advice from Nevada — a task thought to benefit local companies poised for international expansion.

“It’s pretty tough to tell someone ‘Your system stinks, but we want to help you do a better job,’ ” says Bill Bible, a MGM Mirage board member and a former Nevada Resort Association president who was Gaming Control Board chairman in the 1990s.

The 1987 revision did not remove the requirement that Nevada companies get regulatory approval before they set up outside the state, however. That made it difficult to compete against non-Nevada companies for a finite number of casino licenses in other states.

Revising the foreign gaming law was a hot-button issue. Some lawmakers feared that Las Vegas would lose its place as the gambling capital of the world. Industry and regulators argued in favor of allowing Nevada companies more leeway in an increasingly global marketplace.

Some regulators said the restriction might be unconstitutional because it could be construed as prohibiting free trade.

So in 1993, regulators dropped that requirement, too, opting to let the deals go through and monitor them. Nevada companies have to notify state regulators within 30 days of signing an out-of-state deal. Also, companies have to submit periodic reports on non-Nevada operations, including any major changes in ownership or operations and on regulatory concerns such as arrests or complaints from regulators in other states or countries.

 

[aurvandil]

‘Finding of suitability’

In 1997, Nevada regulators began requiring companies doing business outside the state to file an application for a “finding of suitability.” Companies would be investigated if regulators suspected a business deal violated state law because it involved prohibited activities or “unsuitable” partners. The amendment allows companies to voluntarily seek such a finding for business associates, which is what MGM Mirage did after it signed a partnership agreement with Pansy Ho, daughter of Macau casino magnate Stanley Ho, in 2004.

By the time MGM Mirage submitted its application, Wynn Resorts and Las Vegas Sands were operating in Macau. Both had notified regulators and submitted quarterly and annual reports on their business activities there. But the Pansy Ho deal was the first time regulators would make a suitability finding, so it was the first full test of the updated law.

It appears to be facing an even bigger test now.

Last month, New Jersey regulators released results of their multiyear investigation of MGM’s partnership with Pansy Ho, concluding she was an “unsuitable” partner because of her father’s reputed ties to organized crime. Rather than appeal, MGM Mirage is exiting the state, selling its 50 percent stake in the Borgata. Although New Jersey lacks a foreign gaming law, it requires companies to renew their licenses every five years, which gives regulators a chance to pass judgment on business matters.

On March 29, Reuters reported that a man alleged to have been running a VIP room at Sands Macau is a member of organized crime and the mastermind of a murder-for-hire conspiracy that resulted in last year’s convictions of four men.

Nevada regulators say they are reviewing the allegations but could not take action unless they have solid evidence that a Nevada company violated laws of the state or any other place in which it operates.

Therein lies the problem, some experts say.

Nevada law requires continuous monitoring of the goings-on of Nevada companies’ operations outside the state. That monitoring includes reading Securities and Exchange Commission filings, newspaper stories, investigations and reports by law enforcement agencies worldwide, and other countries’ gaming regulatory documents. By law, Nevada regulators have to review the allegations in New Jersey’s report and Reuters’ story.

The Control Board’s corporate securities division, which oversees this process, assigns agents to specific companies to keep up with a fire hose flow of information. Agents, some fluent in foreign languages and others with translators in tow, take fact-finding trips to U.S. and foreign casinos and manufacturing plants and interview local businesspeople, regulators and law enforcement sources.

“We have regulatory and law enforcement contacts around the globe and are constantly receiving intelligence information from within the industry as well as outside the industry,” Control Board member Randall Sayre says. “We have people focused on Asia who keep in contact with sources there so we don’t get caught off guard. Some (casino operators) may be engaged in a relationship that’s problematic that they don’t even know about.”

In 1993, the foreign gaming law was amended to require companies to deposit in a bank at least $10,000 so regulators (who requested the change) could investigate operations outside of Nevada.

Companies must keep the money on deposit for use by the Gaming Control Board at all times and replenish it after any has been used.

MGM Mirage and Harrah’s Entertainment, the largest gaming companies, each fund a revolving account worth $100,000. Las Vegas Sands and Wynn Resorts, which have extensive casino operations in Macau, yet only two resorts each in Las Vegas, have revolving accounts worth $25,000 each. Dubai World, a 50 percent partner with MGM Mirage in the $8.5 billion CityCenter and the first government-affiliated entity to obtain a Nevada gaming license, has the largest revolving account, worth $150,000.

Regulators are reluctant to disclose details of such trips because they don’t want to tip off the companies they regulate. However, Control Board Chairman Dennis Neilander said agents typically travel to Macau at least twice a year to review Nevada operators there, with side trips to Singapore, Japan and other Asian countries where Nevada companies are doing business.

But experts say a handful of brief trips to Macau probably isn’t enough to uncover evidence of what is common knowledge among U.S. regulators but well-hidden by organized crime frontmen who are considered upstanding businessmen in Asia.

A thorough investigation of Macau’s VIP rooms and the flow of money could cost millions of dollars and would require the expertise of Chinese lawyers and undercover officers, according to a former Nevada regulator, who declined to be identified.

Any such efforts could run into objections from Nevada companies footing the bill and from Macau regulators who would say the state is overstepping its authority.

“There’s a fine line here,” says one Nevada gaming attorney, who declined to be identified. “From a public policy standpoint, the Gaming Control Board and Commission are supposed to ensure that gaming is conducted honestly and is free from corruptive influences.”